QAD Reports Third-Quarter--Revenue Rises 56 Percent

Event Summary

Karl F. Lopker, QAD's Chief Executive Officer, stated, "Our third-quarter growth was due to a number of key strategies that are now showing results. They include: our geographic expansion made through acquisitions, the continued expanding demand for services from QAD's Global Services Business and the growing demand for our Web-enabled MFG/PRO 9.0. In addition, the alignment of our cost structures with target levels has been completed."

"There are signs that manufacturers using ERP products have dealt with their Y2K issues and are ready to consider new purchases. Specifically, we are seeing renewed interest from customers and potential customers for our best-of-breed strategy, and from several companies that are re-thinking their enterprise selections made within the last year or two. These companies are now seeking interoperable solutions, such as those offered by QAD, instead of monolithic, proprietary and inflexible applications," said Lopker. "We see evidence of this in the enthusiastic reception to our recently announced e-business strategy and product portfolio. Already QAD is empowering its customers to drive their e-business initiatives through QAD's e-commerce B2B, B2C, EDI gateway products and our Web-based services," Lopker said. "The next step will be to expand our e-business product portfolio with the upcoming delivery of eQ (formerly On/Q) for Relationship Management. We expect eQ to start generating revenue in the first quarter of the new fiscal year."

Market Impact

We believe that QAD is on the mend, although its financial performance remains bleak (See Figure 1). There are a number of reasons for this revenue growth revival. The first reason is the Company's well-established leading global position in Small-to-Medium Enterprises (SME) and lower-end top-tier segments of ERP market, with a large loyal customer base and a very dispersed global network of its offices and indirect channel. Second, QAD is very competitive in speed and ease of global multi-site implementation due to its global service and support capabilities. Third QAD has a very tight vertical and vertical sub-segment focus. Last but not least, QAD was one of the first mid-market ERP vendors to incorporate concepts of e-Commerce, Supply Chain Management, Customer Relationship Management, and integration with other vendors' products, which provides QAD with a 'one-stop shop' capability and an opportunity for sustained future license and service and support revenue. However, the Company is still faced with the challenge of concurrently cutting expenses and restructuring while expediting the delivery of its eQ (formerly On/Q) modules. The eQ product's prolonged and exorbitantly expensive development have seriously affected the Company's financial performance during the last two years.

User Recommendations

We recommend including QAD in a short list in any selection within the following industries: Automotive, Electronics, Food & Beverage, and Medical. However, any organization evaluating QAD products should exercise moderate caution and consider existing functionality only, until the Company regains consistently profitable financial performance.

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